At Multinationals, Country CEOs Should Be Both Local and Global

If you’re among the many multinational CEOs planning to appoint a local executive as your next country head in an emerging market such as Brazil, China, or India, you may want to think again.

Knowing the market and possessing networks are important, but that’s not all your company needs for success today. To deliver stellar performances, we believe that it’s critical for leaders in emerging markets to fit into two ecosystems at the same time: The local market as well as the global corporation.

Look at Sealed Air, the $8-billion global leader in the food safety, facility hygiene, and product protection market, for example. Its customers in China hold the company in such high regard that the China Meat Association recently named Cryovac — Sealed Air’s food packaging brand — one of the industry’s most influential brands even though it isn’t a meat processor.

Sealed Air China has been successful not only because its senior managers understand the local market, but also because they are knowledgeable about the parent company’s value proposition and technical strengths. The China head of the packaging business, Li Xin, spent 13 years working in Sealed Air’s American and Canadian operations before taking up the China assignment in 2004. That long stint earned him the trust of the global CEO, Bill Hickey, and his top management team.

What matters in an emerging market isn’t nationality alone. Take Kwang-Ro Kim, who launched LG Electronics’ India operations in 1997, and led them until he retired a decade later. Kim and his team made LG the market leader, dominating major categories in India such as color TVs, refrigerators, washing machines, and microwave ovens.

The LG India team outdid both domestic and foreign rivals in tailoring its strategies and operations to the Indian market. Indians love cricket, but LG was the first company to launch a TV set with a built-in cricket game. It also became the largest sponsor of the game over time even though South Koreans don’t play cricket.

LG equips its washing machines with software that recognizes simple commands, so that illiterate servants, who perform much of the household work in India, can operate them. Its air-conditioners come with special filters to keep out the large amount of particulate matter in dusty cities. LG India hasn’t ignored rural India; it led the way in developing inexpensive appliances and built the largest sales, distribution, and service network in the country.

Given his career-long tenure with LG, Kim enjoyed an exceptionally high degree of trust and therefore autonomy from Seoul. That’s only part of the story, though. Kim, who spent on average three days a week travelling in India, also developed great insights about the market. Like Li Xin in China, Kwang-Ro Kim’s success was because he was an integrated leader in two senses of the term: A Mr. LG as well as a Mr. India.

Many companies are becoming global — manufacturing in China, servicing clients out of India, and developing products in both countries, for instance. Only a country manager who possesses deep knowledge of local capabilities and enjoys credibility with superiors in various functions at the global headquarters will be able to help corporations take advantage of globalization.

That’s why CEOs would do well to remember that the best leaders in emerging markets are those who fit in with both the country and the company.

Anil K. Gupta is the Michael Dingman Chair in Strategy, Globalization and Entrepreneurship at the University of Maryland’s Smith School of Business. Haiyan Wang is the managing partner, China India Institute.